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With Jonathan Azoff

I Raised my Pre-Seed Round! Now What?

Raising a pre-seed round is a huge milestone for venture-backed climate startups, but it’s just one of many steps in your long journey building your business. Once you’ve raised, the next 12 months are critical in demonstrating traction, building relationships, etc, all so you can go on to raise your next round of funding. While the process varies across different sectors and business models, there are some common tactics to ensure success the next time you raise.

We sat down with Jonathan Azoff to get his take on going from pre-seed to seed as a climate entrepreneur. He is currently Co-Founder and Managing Partner of SNØCAP, a climate-focused early-stage venture investment firm.

Finding your indicators

To start off, there is a bit of a mindset shift when moving past pre-seed raising. You’ve likely spent time figuring out what makes your business stand out– now, you must demonstrate your confidence and capability in executing on your vision. It's time to step away from early idealisms about your business and focus on identifying concrete indicators that show you’re the real deal. These indicators can include:

  • Purchase orders
  • Partnership agreements
  • Letters of Intent (LOIs)

At this point in your business, demonstrating progress against these indicators may be the MOST critical area of focus. You may not have real revenue or even customers yet, but as long as your team has a strategy to deliver on this demand, you’re headed in the right direction.

Knowing what indicators to focus on will depend on the nature of the business and the preferences of your future seed investors. It’s worthwhile to spend time speaking with both fellow founders and prospective investors to understand what metrics are common for seed, what traction is expected, etc. Also, remember that not every pre-seed investor invests in seed, so asking them for their advice might be counterproductive.

Note: macroeconomic trends, such as the pandemic, will have great influence on the behaviors of your consumers. Think about how these trends might affect where you should optimize, and where you can spend less effort. Keep yourself up to date on what’s happening in the world, and sell a story that takes the present (and likely future) into account. If you’re aware of how these trends will force you to adapt over time, seed investors will be more likely to see you as reliable.

Your team is your foundation

The people on your team are a major component of what investors scrutinize through Series A. Each individual will be evaluated by investors in terms of their reputation, experience, skillset, culture fit, ability to execute, etc. Common things to consider:

  • The whole is greater than the sum of the parts. What gives you confidence that your team can execute on your vision? What brought your team together? These are some of the many questions investors will ask you when evaluating your team. Founders have a great opportunity here– sell your story about why your collective sum is greater than your individual efforts. Figure out your strengths, weaknesses, and what an investor might perceive as a concern, and plan for how you can mitigate issues through new hires, external advisors, etc.
  • Hire holistically: Founders often make early hires based purely on their resume rather than other skills/characteristics that may be valuable in an always-changing environment (i.e. your early-stage company). If you simply hire people to fit into your current business needs without looking at the whole person, you may end up with unintended gaps in your talent. Consider wide ranges of experience and background – even if they aren’t exactly in the role you’re hiring for. Having diverse employees that are adaptable will further de-risk the investment in the eyes of a seed investor.
  • Collective vision > founder ambition. Put away your hubris and invest in building strong buy-in from your team around a collective vision.  Shared buy-in results in greater retention of key talent, which will show greater consistency to prospective investors. Any change in your core members between the pre-seed to seed stage can raise red flags with early investors, as it signals instability and a lack of internal conviction around the business.
  • Recognize. Consistent recognition is one the greatest motivators for retention. Publicly recognizing and listening to employees within your company is a great way to show that you value their contribution to your team. Simply put, hiring great people isn’t enough– you should inspire conviction in the way you lead, whether it concerns your vision, product direction, or anything else.

Know your risk

All in all, you’ll need to approach raising your seed round with a heavy dose of realism and honesty. Before approaching investors, it’s important to have a strong grasp of the risks to your business so you can shape a stronger narrative for your pitch, build a more comprehensive and effective data room, and effectively respond to diligence. Some tips:

  • Practice telling your resilience story. Seed investors largely bet on the team, which means team risk is TOP of mind during diligence. A strong founder can balance team risk with depth of experience around execution, management, etc, as well as general resilience. Are there experiences in your background as a founder that illustrate that you were able to overcome adversity, even if ultimately you failed? The anecdotes that stand out are those where you've had to change course and adapt on the fly; focus there.
  • Know the biggest existential risk to your business. Every business or startup has 2-3 risks that are existential (i.e. result in a complete collapse of the business). Spend time to understand these and get super clear on how you can avoid or mitigate their impact. With a strong narrative on existential risk, you gain more credibility in the minds of investors than other founders who come up with a non-risk (i.e. an unrealistic “risk” just to tick the box in diligence). Anticipation is an early indicator that you’re ready to face business challenges and handle them appropriately.
  • Start a journal. Keep track of what you go through as a founder on a daily/weekly basis– these anecdotes may be relevant to demonstrating your resilience when you go to raise next. Get specific; when you do face pitfalls, monitor the experience, note the challenges, and track how you faced them. This kind of content will further help to showcase your reliability, even to risk-averse investors.

Jonathan Azoff is a technology leader, engineering manager, and software expert with over 15 years of experience in building teams and products for rapid-growth businesses. His expertise is with venture-backed, consumer-oriented businesses, specifically in finance, real estate and logistics. He is currently Co-founder and Managing Partner at SNØCAP, a platform targeting building for sustainability. He is also a Partner at Fortium Partners and is the Director of Technology and a Board Member at Sweet Farm. Jonathan holds a degree in computer engineering from Santa Clara University.

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